Certified Meeting Professional (CMP) Practice Exam

Which budgeting method is used for new events with no financial history?

1. Incremental budgeting

2. Zero based budgeting

3. Traditional budgeting

4. Variable budgeting

The correct answer is: Zero based budgeting

The budgeting method that is best suited for new events with no financial history is zero-based budgeting. This method requires that every expense must be justified for each new period, starting from a "zero base." Because there is no prior financial history for the new event, this method allows planners to assess all costs anew, rather than just adjusting previous budgets upward or downward. This approach promotes a more comprehensive understanding of all potential costs and funding needs, enabling effective allocation of resources based solely on necessity and planned outcomes. By utilizing zero-based budgeting, event planners can focus on prioritizing activities and eliminating unnecessary expenses, ensuring that each line item in the budget is aligned with the event’s goals. This is particularly valuable for new events where previous financial data or trends are unavailable, allowing for a fresh evaluation of all potential expenditures. Other budgeting methods, such as incremental budgeting, rely on previous budgets to form the base, which would not be suitable in the context of an event with no financial history. Traditional budgeting also looks back at historical data for planning future budgets, making it less effective for entirely new events. Variable budgeting is more focused on adjusting budgets based on changing conditions and levels of activity, which may not apply when establishing a baseline for a new event.